In one of the largest government-related cloud computing deals to date, the State of Minnesota on Monday announced it has signed an enterprisewide agreement to use the Microsoft Business Productivity Online Suite (BPOS) to provide government employees with Web-accessed e-mail, SharePoint collaboration, instant messaging and video conferencing capabilities.

Forged by the state's Office of Enterprise Technology (OET), the agreement will see approximately 33,000 executive branch employees migrate to Microsoft-hosted BPOS services over the next 16 to 30 weeks. The executive branch includes state administrative agencies including the departments of Agriculture, Commerce, Health, Human Services, Labor, Public Safety and Transportation, among others.

The contract is scalable to cover broader adoption expected among the judicial and legislative branches, school districts and local governments within the state. That could eventually more than double the number of users, according to state officials.

Minnesota's latest move stems from a 2009 agreement with Microsoft to use Exchange as its enterprise e-mail platform. That deal was expanded this June to cover unified communications and collaboration services.

The move to the cloud was portrayed as a natural extension of ten-year plan forged two years ago aimed at centralizing procurement, scaling up shared services, improving cyber security and improving business processes.

"This deal has to be looked at in the context of a master plan that positions us for the future," said Gopal Khanna, Minnesota's Chief Information Officer, in an interview with InformationWeek. "We have to get to a shared services model so we can serve not only the executive branch, but counties and cities as well."

Before the state's two-year-old standardization and centralized procurement drive, which has been advocated by Governor Pawlenty, various agencies, departments and branches of government pursued a hodgepodge of e-mail and collaboration strategies.

"We're consolidating all those disparate investments and making those capabilities available as a service," said Tarek Tomes, Assistant Commissioner of the OET. The state expects to save money on deployment and upgrade costs while gaining instant access to the latest functionality.

Data-center consolidation is also a part of the state's long-term IT plan, but that's not what motivated the move to cloud-based e-mail and collaboration. OET officials said staffing levels will remain at current levels. Microsoft will manage the Exchange- and SharePoint-based applications while Minnesota IT employees will manage and provision the services.

The cloud contract specifies that Microsoft will provide dedicated, secure data storage in a U.S.-based facility. That may sound like a simple hosting deal in which Microsoft runs servers on the state's behalf, but that's not the case, both parties insist.

"To us, cloud computing means it's a services offering that has a life of its own," said Tomes. "The services we'll be receiving have their own roadmap, and we'll gain the latest functionality as it becomes available."

Microsoft currently claims more than 40 million users of its cloud computing services, which include Microsoft Office Live, BPOS and various online versions of Microsoft Dynamics applications. Commercial cloud customers include McDonalds, Kraft, Coca Cola, GlaxoSmithKline and a number of large energy, telecom and banking organizations.

In the public sector, Microsoft counts 3.4 million users, including 400 state and local government customers added over the past 18 months.

The deal with the State of Minnesota is Microsoft's largest thus far with a government agency. It outclasses the 2009 deal between Los Angeles, Google and Computer Sciences Corp. to provide G-mail- and Google Apps-based services to 30,000 city employees. As InformationWeek recently reported, 36 out of 40 city departments in Los Angeles have moved to cloud-based services.

Minnesota's contract with Microsoft extends through February 2015. An OET spokesperson said costs will depend on the ultimate volume of users. With more than 30,000 users, the state expects to pay "significantly less" for all BPOS capabilities than the $9.50 per user, per month OET currently charges internal customers for e-mail services alone.